All sectors of the modern real estate sector are evolving at breakneck speed. Although a considerable number of real estate investors have successfully leveraged the notable uptick in price increases to record historic profits, the current market still presents a wide range of uncontrollable variables that make for a dynamic environment in which to conduct business.
The good news is that talented professionals across all sectors of the real estate industry—from lenders to key stakeholders—are actively developing creative solutions to the growing number of challenges that investors face in the rapidly changing real estate market.
Supply Chain Delays
The ongoing COVID-19 situation has created backlogs in several key global supply chains—making it harder and costlier to attain needed construction materials for development purposes. There is presently an overwhelming demand for newly-built residential homes which is fueling price increases and making home ownership untenable for many a would-be homebuyer. Investors should focus on creating and maintaining close working relationships with sponsors and lenders to ensure accurate budget forecasting and that projects stay on track to reduce overall expenses.
Inventory Shortfalls
Another culprit behind the price creep across the country is the widespread inventory shortage. Due to historically low interest rates, the national real estate market still holds a considerable amount of appeal for both foreign and domestic investment entities. This has led to a significant increase in the number of institutional investors becoming active players in the residential real estate space—particularly in the single family rental class. The resultant bidding wars for the limited number of viable investment properties has driven up property values but has simultaneously put notable pressure on investors and private lenders to adapt. Fortunately, with the expiration of both the federal eviction and foreclosure moratoriums, the inventory situation should begin to improve in the near future.
Limited Appraisers
For a large segment of the real estate investor community, it has been challenging to find a qualified appraiser—a necessary component of any transaction—due to the uptick in delays. Although delays in the appraisal completion fluctuate from market to market, a number of densely populated urban areas are currently experiencing more than a three-to-four-week delay on average. This increasingly common problem is mainly volume and market-driven. For instance, the national number of qualified appraisers has dipped nearly 15% over the last eight years alone and is continuing to rapidly decline as many of the more experienced professionals reach the age of retirement. Help is on the way, however, as a number of official licensing agencies are attempting to reduce the appraiser shortage by altering the certification criteria and implementing virtual options into the training pipeline. Additionally, there is a growing number of desktop and drive-by appraisal companies that real estate investors may want to consider as an alternative solution if they are facing a time-crunch to close on a deal.
Set Yourself Up for Success
One of the most important decisions that you will have to make early on in your real estate investment career is how you will fund your business transactions. Having a reliable and trustworthy lender with the requisite industry experience to offer you invaluable insights and guidance all whilst providing you with fast and efficient access to the capital you need when you need it is something that is hard to find in the modern real estate era—but that is exactly what you get when you choose to partner with Coastal Capital Funding. We are a Nationwide Direct Private Lender that lends on non-owner-occupied property, providing a comprehensive range of products from fix-and-flip loans to new construction financing (and everything in-between). Contact us today to learn more about how we can help you navigate the current marketplace and achieve your investment goals.